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Global natural gas consumption declined by an estimated 75 bcm (or 1.9% y-o-y) in 2020. We have revised this from our previous estimate of a 2.5% y-o-y drop, due to colder-than-expected temperatures in the northern hemisphere in December and data updates from emerging markets. As a result, 2020 would remain the year with the largest ever recorded drop in gas demand in absolute terms, but would be on a par with 2009 in relative terms. Natural gas demand proved to be relatively resilient despite an exceptionally mild Q1 followed by the widespread impact of the Covid-19 pandemic – global energy demand declined by an estimated 4%, principally dragged down by oil and coal, which declined by a respective 9% and 4% y-o-y.

Part of this resilience can be explained by fuel switching in power generation. The IEA Global Energy Review highlights that coal-to-gas switching led to a 58 Mt reduction in CO2 emissions from the power sector in 2020. Gas prices dropping to multi-decade lows across all major gas-consuming regions improved the cost-competitiveness of gas-fired power generation, triggering coal-to-gas switching. The most visible impact was in the United States, where gas-fired generation increased by close to 3% while coal-fired generation fell by 19%. In Europe, gas consumption partially recovered over the second half of 2020 from a 10% drop in H1, thanks to lower nuclear availability and switching from hard coal and lignite. In Asia, gas-fired generation posted slight increases in China, India and Korea, and limited decline in Japan. However, and in spite of these favourable factors, power generation was the most significantly affected sector in 2020 and accounted for almost half of the y-o-y decline in gas demand, with an estimated drop of close to 35 bcm compared to 2019.

On the supply side, almost all regions were affected by production cuts, with the main exporters being the most affected. Eurasia, faced with declines in both domestic and export markets, accounted alone for over 40% of the total fall in gas production in 2020. Interregional trade was instrumental in managing the supply adjustment from the demand shock observed in the first half of 2020. Long-distance and interregional pipeline trade was negatively affected, with a contraction in trade flows of about 40 bcm (or down 15% y-o-y), principally due to lower European imports (down about 30 bcm). Global LNG trade managed to maintain positive growth, albeit at a meagre 1.4% y-o-y increase (or 1% net of reloads), far from the double-digit annual growth rates observed in previous years.

Estimate of y-o-y change in coal- and gas-fired power generation, 2019-2020

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Natural gas demand in North America fell by about 2.2% y-o-y in 2020 (or close to 25 bcm), accounting for about a third of the net decline in global gas demand.

Gas consumption in the United States fell by about 2% y-o-y in 2020. Gas burn for power generation grew by 2.7% despite power demand declining by about 3%, triggered by abundant domestic gas supply and low prices. This mitigated the double impact of a mild first quarter and Covid-19-related loss of economic activity. The residential and commercial sector was the most affected, gas demand dropping by 8.6%, while in the industrial sector it declined by 1.9%.

US dry gas production was proportionally less affected, with a 1.6% y-o-y decline, in spite of a plunge in drilling activity causing a 50% drop in the gas rig count. Production levels were sustained in the Appalachian Basin, the largest contributor to dry shale gas production, thanks to productivity improvements and the completion of previously drilled but uncompleted wells. Additional demand came from the contribution of growing LNG exports (up 16 bcm in 2020 or a 34% annual increase), changes in the pipeline trade balance (with lower imports from Canada and higher exports to Mexico), and a net increase in underground storage inventory.

Canada’s natural gas consumption declined by an estimated 4%, with demand from industrial and other large consumers (including power generation, which accounts for two-thirds of total consumption) falling by 2.5%. Meanwhile, residential, commercial and other small consumers saw their consumption decline by almost 7%. Canadian natural gas production suffered from the combined effects of lower domestic demand and reduced pipeline exports to the United States, leading to an estimated 2% decline in domestic production.

After the major impact of Covid-19 in the second quarter, gas consumption in Mexico recovered during the second half of 2020, principally due to the power generation sector. Apparent natural gas consumption fell by an estimated 1% y-o-y in 2020, while domestic gas production (which covers about one-third of supply) decreased by over 2% y-o-y, in line with consumption. Total imports thus remained relatively stable, but with a switch from LNG to pipeline imports from the United States.

Natural gas balance y-o-y differentials for the Canadian market, 2019-2020

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Natural gas balance y-o-y differentials for the United States market, 2019-2020

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Natural gas balance y-o-y differentials for the Mexican market, 2019-2020

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Consumption in the Asia Pacific region increased by 0.5% in 2020, which is remarkable given the demand declines seen in most other regions amid the Covid-19 crisis. But it is still a far cry from the 5% average growth in the 2015-2019 period. The continued expansion of demand was due to relatively healthy growth in China, which more than offset declining consumption elsewhere. Production fell by 1% as low prices, CAPEX cuts and mature field declines hit production levels in Indonesia, India, Thailand and Malaysia. This was only partially compensated by strong production growth in China (and modest growth in Australia). Net imports into the region increased by 5% (or 10 bcm), met entirely with additional LNG, while pipeline gas imports decreased by 5%.

Japan’s gas consumption declined by 4.5% in 2020. The negative effects of Covid-19 on industrial and commercial activity, which were strongest in May, continued to weigh on gas demand throughout the year. However, an unexpected cold spell – combined with low nuclear and solar availability – provided a boost to gas demand in December, mitigating the overall drop in 2020.

Korea’s gas demand registered a 2% increase in 2020. After a sharp drop in Q2 due to Covid-19, gas consumption rapidly recovered in the remainder of the year. Increased gas burn in the power sector reflected temporary nuclear outages in Q3 and the government-mandated shutdown of 16 coal-fired plants in December. Some coal-to-gas switching also occurred in 2020 thanks to low spot LNG prices in Q2 and Q3. A cold winter bolstered gas consumption further in Q4.

China’s natural gas consumption increased by 6% in 2020 as the Covid-19-induced slump in Q1 gave way to an accelerating economic recovery in the rest of the year. Colder-than-average winter weather gave an additional boost to residential demand in Q4. Production grew by 9% and reached 189 bcm in 2020 as China’s state-owned energy majors responded to government orders to prioritise domestic supply growth. About a quarter of incremental production came from shale developments. Natural gas imports rose by 5%, with LNG growing by 12% as opposed to pipeline gas imports, which registered a 5% decline.

India’s gas demand shrank by 1.4% in 2020 as Covid-19-related restrictions hit gas use in the city gas sector especially hard, while consumption in industry remained resilient. Domestic production fell by 11% as operators struggled to maintain output at mature fields in the face of poor production economics in a low-price environment. LNG imports increased by 15% thanks in part to the inauguration of the Mundra LNG terminal in February 2020.

Total consumption in Emerging Asia decreased by an estimated 5% in 2020, but LNG imports grew by 1% as production declines continued in several major legacy producers across the region.

Natural gas consumption in Asia Pacific, 2020

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Natural gas production in Eurasia declined by 6% y-o-y in 2020, as the region’s gas industry faced the double impact of lower domestic demand (down by over 4%) and exports (down by 10%). Eurasia alone accounted for over 40% of the drop in global gas production in 2020.

Russian Federation’s (“Russia”) natural gas production fell by 6.5% y-o-y. Approximately 80% of this reduction was concentrated in the first half of the year, when production was down by 10% y-o-y amidst an unseasonably mild winter season and plummeting exports to Europe. The decline in production moderated to 2.5% in the second half of the year, driven by recovery in domestic demand and export flows returning close to previous years’ levels by the end of 2020. As such, the country’s production grew by close to 25% in Q4 compared to Q2, a seasonal swing almost three times larger than in 2019. This was supported by Russia’s giant swing fields, including Zapolyarnoe, which accounted for over 20% of the production increase between Q2 and Q4. Russia’s extra-regional export flows declined by over 10% y-o-y in 2020. This was entirely driven by lower net pipeline exports to Europe, falling by close to 15% in 2020 compared to the year before. Pipeline deliveries to China via the Power of Siberia pipeline totalled 4.1 bcm in 2020, below the initially scheduled 5 bcm. LNG exports rose by close to 3%, with both Sakhalin-II and Yamal LNG ramping up exports. Domestic demand fell by an estimated 5% y-o-y, largely due to lower gas-to-power demand, as thermal generation declined by over 9% y-o-y in 2020.

In Central Asia gas production decreased by close to 5% y-o-y. This was largely driven by lower exports, as the region’s pipeline supplies to China fell by 13% y-o-y to below 40 bcm. Turkmenistan alone accounted for over three-quarters of the net drop. Whilst Kazakh and Turkmen gas production remained stable, gas output in Uzbekistan plummeted by over 16% y-o-y to reach its lowest level since 1996.

In Azerbaijan gas production rose by over 6% y-o-y to reach 26 bcm in 2020. This was largely driven by the rapid ramp-up of pipeline exports via the TANAP pipeline. Azerbaijani gas exports to Turkey increased by an impressive 21% y-o-y (or 2 bcm), supported by higher production at the Shah Deniz-II field.

Natural gas production in Ukraine declined by 2% y-o-y to 20 bcm in 2020. However, gas consumption rose by 3% y-o-y to 30 bcm. This was primarily driven by higher gas-to-power demand, which rose more than twofold. Belarus’s pipeline imports from Russia decreased by 7.4% y-o-y in 2020, as domestic consumption declined on lower gas burn in the power sector and lower demand in the residential and commercial sectors.

Eurasia’s gas production, extra-regional exports and estimated deliveries to the domestic market in 2020

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European gas consumption proved to be rather resilient in the face of the unprecedented macroeconomic shock caused by the Covid-19-induced lockdowns, falling by 2.8% y-o-y in 2020. Gas-to-power demand fell by 3% y-o-y and accounted for 40% of the net drop, while distribution network-related consumption declined by 2.5% y-o-y and demand from industrial consumers decreased by close to 4% y-o-y.

European gas markets faced an unprecedented demand shock during the first half of 2020. Gas demand plummeted by over
7% y-o-y, due to a combination of mild temperatures in Q1 and the Covid-19-induced lockdowns in Q2. The impact was particularly felt in gas-to-power demand, which plummeted by 15% y-o-y in Q2. European gas demand started to recover in June and rose by
1% y-o-y in Q3 2020. This was largely driven by gas-fired power generation, rising by 5% y-o-y despite the decline in electricity consumption and rising renewables output. In Q4, European gas demand increased by 2.5% y-o-y, despite the restrictive measures imposed amid a second wave of the pandemic. Gas consumption was supported by higher space heating demand in the residential sector and an increase of over 2% in gas-fired power generation. European domestic gas production fell by 8% y-o-y. The Netherlands alone accounted for half of the decline, as output from the giant Groningen field almost halved. Norwegian natural gas production remained resilient, declining by a mere 1% y-o-y in 2020. Following a drop close to 7% y-o-y in H1 2020, gas output rose by more than 5% in the second half of the year.

European gas imports fell by close to 10% y-o-y in 2020. Both LNG and pipeline imports were affected, falling by 3% and 12% respectively. European LNG imports rose by 20% y-o-y in H1 2020, as Europe absorbed two-thirds of the global incremental LNG supply, amid lower-than-expected demand in Asia. This put downward pressure on pipeline imports, which plummeted by close to 20% y-o-y. LNG imports into Europe started to decline in June and fell more than 20% y-o-y in the second half of 2020. This in turn supported the recovery of pipeline gas supplies through the second half of the year. Imports from North Africa increased by 25% y-o-y, and Russian pipeline flows had recovered close to 2019 levels by the end of the year.

Storage movements reduced Europe’s import requirements in 2020 by close to 30 bcm. Storage levels above the five-year average at the start of the heating season depressed injection needs, which fell by 20% y-o-y, while withdrawals rose by
34% y-o-y. Storage withdrawals were particularly strong in Q4, rising more than twofold compared to 2019. Pipeline exports to Ukraine rose by 12% to 16 bcm in 2020. This was facilitated by virtual reverse flows, accounting for 45% of total exports.

European natural gas supply–demand balance, 2019-2020

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Gas consumption in the Middle East increased by 0.8% in 2020 as growth in Iran, Israel and Saudi Arabia outweighed declines in the United Arab Emirates, Qatar and Kuwait. Production was 0.5% higher and net exports 0.6% lower than in 2019. Higher pipeline gas deliveries from Israel to Egypt were offset by lower pipeline gas exports from Iran to Turkey. LNG trade saw a small decline in 2020 due to lower imports into Jordan and reduced exports from Oman.

Saudi Arabia, which has no international gas trade, saw its domestic consumption and production increase by an estimated 1.5% in 2020. Gas supply to the power sector remained stable, while gas use in industry is likely to have increased as the ramp-up of the 26 bcm Fadhili gas processing plant to full capacity by May 2020 more than offset the decrease in associated gas production after last year’s OPEC+ oil production cuts.

Iran’s natural gas consumption increased by an estimated 3% in 2020, with most of the growth from the power generation and residential sectors. Partial official data indicates that the expansion may have been higher than our estimate. Production is estimated to have increased by 2% due to the ongoing development of the South Pars field. Net exports are likely to have fallen by 2-3 bcm, as deliveries to Turkey dropped in Q2 due to a pipeline explosion and exports to Iraq were temporarily cut back in December 2020 as a result of payment disputes.

Qatar’s gas consumption decreased by 2.5% in 2020, mainly due to lower industrial and power generation needs. Production in 2020 was slightly lower than in the previous year, while LNG exports increased by 0.4% as Qatar Petroleum leveraged its low-cost LNG supply to gain further market share in a challenging price environment. Deliveries via the Dolphin pipeline to the United Arab Emirates and Oman remained stable at 20 bcm.

Israel’s gas consumption was up by an estimated 5% in 2020 due to growing gas burn in the power generation sector. Total gas production was up by more than a third thanks to the giant Leviathan field, which started commercial production at the end of 2019. LNG imports remained stable at below 1 bcm, while pipeline gas exports rose almost sevenfold as deliveries to both Jordan and Egypt ramped up significantly.

The United Arab Emirates experienced a 4% drop in total gas consumption, caused entirely by the power sector. Gas-fired generation was squeezed by lower electricity demand as well as growing renewable output, the start-up of the first 1.4 GW unit at the Barakah nuclear plant and the grid connection of the first 600 MW coal-fired block at the Hassyan plant in Dubai. Production decreased by 5% due to lower associated gas production following the OPEC+ supply cuts. Pipeline gas imports from Qatar remained stable, while net LNG exports declined by 4% in 2020. 

Change in natural gas demand and supply in the Middle East, 2019-2020

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Natural gas demand in Africa was relatively stable in 2020, with a limited decline estimated at 0.6% y-o-y, principally due to the positive contributions of Nigeria and Algeria. Lower exports weighed on production, which declined by about 3%.

After a decline in the second quarter of 2020, Egypt’s monthly natural gas demand recovered to its 2019 level in September, and thus remained almost stable in 2020 with an estimated 1% annual fall compared to 2019. This was mainly driven by recovery in electricity consumption, which accounts for 60% of total gas use. This was in spite of a 19% increase in electricity tariffs in July as part of the country’s plan to phase out electricity subsidies by 2022. In contrast, the rebound in domestic production remained subdued due to lower LNG exports (down 60% y-o-y at less than 2 bcm), which resulted in an estimated 9% y-o-y decline in Egyptian gas production for 2020.   

Algeria’s Ministry of Energy reported a 1% decline in gas production in 2020, while exports fell by 8% – pipeline flows to Europe were strongly affected in the first half of 2020, but managed a recovery over the second half of the year to reach a total of 21 bcm, 5% below their 2019 level. Meanwhile, LNG exports declined by 13% y-o-y to 14 bcm. Algeria’s resulting apparent consumption thus increased by about 4%. The country’s gas system is constrained by a combination of declining gas production from the legacy Hassi R’Mel complex (whose net output is falling further due to growing reinjection needs to maintain reservoir pressure) and strong growth in domestic demand, mainly driven by the power generation sector – which entirely relies on gas-fired capacity. Other North African markets also experienced negative growth in 2020 – Libya’s pipeline exports to Italy dropped to a decade low of 4 bcm (down 24% y-o-y), and gas consumption was reported as down by 5% in Tunisia, while electricity demand in Morocco (the main driver of gas consumption) fell by 3%.

Nigeria, the region’s largest LNG exporter, had stable exports at close to 28 bcm in 2020, while domestic consumption reportedly increased by 6% y-o-y. The Nigerian government had declared 2020 to be the “Year of Gas”, with a range of policy reforms such as: the implementation of the Nigeria Gas Transportation Network Code to define the contractual framework for transporting gas; the rollout of the National Gas Expansion Programme to stimulate domestic gas demand and oil-to-gas substitution in transport; and the Petroleum Industry Bill, which includes new provisions for gas aggregators and introduces penalties for flaring. Other West African countries actively prepared for domestic gas development in 2020, such as Senegal with its enactment of a new Gas Law to monitor future domestic production, and the confirmation of Ghana’s Tema LNG terminal, due to start operations in 2021. In both countries natural gas is set to replace heavy fuel oil for power generation.

Natural gas production in Africa by domestic and export market destination, 2019-2020

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Regional gas consumption declined by 9% y-o-y in 2020, principally due to double-digit percentage falls in Venezuela and gas exporting countries. Production fell by a similar 9% on a combination of lower domestic demand and LNG exports.

Gas demand in Argentina, the region’s largest consumer, fell by an estimated 5% y-o-y in 2020 with a 5% decline in gas-fired power generation and 4% fall in industrial consumption, partly compensated by higher residential demand (up 0.5%) due to the impact of colder temperatures and confinement measures during the southern hemisphere winter months. Domestic gas production declined by close to 9% y-o-y, and ended the year with December’s output 24% below the country’s peak production level in mid-2019. The government launched a four-year Gas Plan in December 2020 to support domestic supply, under which production volumes are contracted at an average price of USD 3.50/MBtu – above the average lifting costs of existing assets and enabling domestic supply to be secured below the level of pipeline and LNG import prices. The lifting of lockdown and these price incentives at the end of the year favoured a rebound in drilling activity in the Neuquén Basin’s Vaca Muerta play, with the monthly count of fracking operations rising by 40% between November and January. 

Brazil experienced an estimated 6% y-o-y decline in gas demand in 2020. The industrial sector, the country’s largest consumer of gas, was relatively resilient with a 2% drop, while power generation (which accounts for a third of total gas demand) fell by close to 10%. The energy sector‘s own consumption increased by 4% on higher oil and gas output. Brazil’s gross natural gas production increased by 4.3% y-o-y to reach a record of 46.6 bcm in 2020, thanks to the development of pre-salt associated gas. This increase in production led to higher reinjection and lower LNG and pipeline imports to meet lower domestic demand needs. The New Gas Act, which aims to establish an open and competitive gas market, was approved by the lower house of Brazil’s parliament in August 2020. The New Gas Law received presidential approval on 8 April 2021.

Venezuela reported a 17% y-o-y drop in gas consumption in the first eight months of 2020 – most of its gas production is associated with oil, which collapsed from 0.87 mb/d in 2019 to 0.53 mb/d in 2020. Gas exporting countries were all strongly affected: Bolivia managed to keep its pipeline exports stable (even rising close to 3% y-o-y) but reported a 20% drop in domestic consumption, while Trinidad and Tobago’s LNG exports and gas demand declined by 19% and 15% respectively. Peru’s production declined by 11% according to Perupetro’s reporting, while its LNG exports remained stable. Gas demand in Central America, which is principally driven by power generation needs, was also significantly affected, with a 12% y-o-y decline in LNG imports in 2020. 

Annual Natural gas balance, Central and South America, 2019-2020

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Monthly Natural gas balance, Central and South America, 2019-2020

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The global LNG trade grew by 1.4% in 2020 (1% net of reloads), showing resilience in a context of declining gas consumption. While this positive growth rate is a far cry from the double-digit annual growth observed since 2016, it is nonetheless a sign of resilience in the market given that global gas demand was down by 1.9%.

LNG trade increased by 11% y-o-y globally in Q1, despite lower imports into Covid-19-struck Northeast Asian markets, as cargoes markedly switched to Europe, which saw LNG imports in Q1 increase by 26% y-o-y. Between Q2 and Q3, with the pandemic hitting the global economy, total trade volumes reversed to register declines of 1% in Q2 and 4% in Q3. Asia's trade volume increased by 8% in Q4, supported by colder-than-expected temperatures in Northeast Asia, while imports to Europe fell by 30%, resulting in total LNG trade decreasing by 1% y-o-y in Q4.

Asia accounted for all the increase in LNG trade, keeping a leading 71% share of global imports. This was mainly driven by China (up 12%) and India (up 15%). In addition, Thailand (up 18%) showed strong growth, while Japan (down 3%), Indonesia (down 31%) and Pakistan (down 9%) experienced declines. Korea’s imports remained almost flat. LNG trade to regions other than Asia declined by 4%. For example, Europe’s imports were down 3%, as dramatic declines in Q4 offset the increased volumes in Q1. Myanmar and Croatia joined the group of LNG importing countries and received their first LNG cargoes in June 2020 and January 2021 respectively.

The United States was the largest source of growth on the supply side, accounting for 70% of the total increase. Qatar, Australia, Russia and the United States remain the leading exporters of LNG, accounting altogether for two-thirds of supply. US LNG exports surged by 34% y-o-y despite 170 cargoes being cancelled in 2020, and supplied most of the incremental demand in Northeast Asia between December 2020 and January 2021. Exports increased by between zero and 3% in the three other major exporting countries. Other suppliers experienced substantial declines, such as Egypt (down 57%), Trinidad and Tobago (down 20%), Algeria (down 13%) and Malaysia (down 8%). Liquefaction capacity outages were elevated for much of 2020. This contributed to the tightening of the global LNG market. For a brief period in the second half of the year as much as 13% of global LNG export capacity was taken offline for planned or unplanned maintenance.

LNG volumes traded on a spot or short-term basis continued to rise in 2020. Preliminary shipping data suggest an increase of 6%, to account for 37% of the global LNG trade – its highest share on record. Short-term volumes were driven up by the higher net selling positions of portfolio players and uncontracted commission cargoes.

Liquefied natural gas export growth in selected regions, 2019-2020

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Liquefied natural gas import growth in selected regions, 2019-2020

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Regional natural gas prices closely reflected the rapidly changing dynamics of the global gas market in 2020. The steep drop in gas consumption through the first half of the year led to a collapse in prices, which plummeted to decade lows across all major gas-consuming regions in Q2. In Europe, TTF had fallen below the USD 1.00/MBtu mark by the end of May, while Asian LNG spot prices traded at below USD 2.00/MBtu at the beginning of June –historical lows in both cases. In the United States, Henry Hub averaged below USD 1.80/MBtu in H1, its lowest level since 1995.

Asian and European gas prices then recorded strong gains during H2 2020, recovering well above their 2019 levels in Q4. This was partly driven by tightening LNG supply due to a combination of planned and unplanned outages, as well as recovering gas demand in both Asia and Europe. The combination of a cold spell, low nuclear availability in Japan and outages at regional liquefaction plants led to a price rally in Asian LNG spot prices at the end of 2020, climbing to an historical high of over USD 30/MBtu in the first half of January 2021. Despite the strong gains recorded in H2 2020, both TTF and Asian LNG spot prices averaged record lows in 2020, at USD 3.20/MBtu and USD 4.20/MBtu respectively. Henry Hub averaged USD 2.00/MBtu in 2020, its lowest level since 1995.

Spot charter rates closely followed the price fluctuations in Asian and European spot gas prices. Following a dip below USD 30 000/day during the summer months (or one-third below their five-year average), charter rates had risen sixfold by the end of Q4 2020 and closed the year well above their 2019 levels in both the Atlantic and Pacific basins.

In contrast with spot indices, oil-indexed LNG prices weakened y-o-y throughout H2 2020, as oil prices, which averaged below USD 40/barrel between March and December, filtered through the price-setting reference period of the contracts. Reflecting the dominance of oil-indexation in Asian LNG markets, the estimated drop of 30-40% in oil-indexed LNG prices had a significant impact on their import prices.

The combination of low spot gas prices and oil-indexed LNG prices has benefited LNG importers across all regions. LNG import prices have fallen by close to 40% y-o-y in the United Kingdom and Brazil. In Asia, China and India – who have a higher exposure to spot procurement – benefited the most, with their LNG import prices falling by 26% and 29% y-o-y respectively. Japan and Korea have recorded import price drops of 21% and 23% y-o-y respectively and displayed significantly higher price stability compared to other importers.

Estimated Liquefied natural gas import prices in selected countries, 2019-2020

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Selected natural gas price indices, 2020

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